Two years ago, the CEO of a Middle Eastern oil company stopped in Washington, D.C. on his way home from a visit to Silicon Valley. What he wanted to discuss with me over a cup of coffee wasn’t the future price of oil or Iran’s activities in the Middle East but rather the astonishing thing he had seen in California. “I couldn’t believe the number of Teslas,” he said. “They were everywhere.”
What he saw in all those electric cars was a looming transition that in the decades ahead will shift the world away from using oil, natural gas and coal. The transition will have an enormous global economic impact, but it will also bring about major changes in the map of global power. China is poised to be the big winner, Russia and Middle East oil exporters the big losers. The U.S. is likely to fall somewhere in between.
Enormous efforts are now under way to bring about this shift, but it is likely to take longer, to be more expensive and to require more technical innovation than many now anticipate. For the U.S., there’s also the matter of what happens to the more than 10 million jobs that the American oil-and-gas industry now provides.
“Energy transition” has become the shorthand for discussions about the future of energy ever since 195 countries pledged in the 2015 Paris climate agreement to keep global temperatures from rising 2 degrees Celsius above preindustrial temperatures and to make best efforts to cap the rise at closer to 1.5 degrees.
A rapid rise in oil and gas production has given America new influence and choices.
The target for getting there is “net zero carbon” by 2050 or shortly thereafter—a goal already accepted by the European Union, Britain and Japan, among others. Democratic nominee Joe Biden has likewise pledged to put the U.S. on “an irreversible path to…net zero emissions.” In July, he unveiled his vision for an “Equitable Clean Energy Future”—a $2-trillion climate plan, backed by an “enforcement mechanism,” which aims to eliminate carbon emissions from electricity by 2035 and, in the wider economy, to shift from oil, natural gas and coal (which in 2019 provided 80% of U.S. energy) to solar and wind (which provided 3.7%) and other technologies to get to “net zero carbon” by “no later than 2050.”
The bandwagon is growing. Companies, including some oil and gas and electric power companies, are promising to go “net zero carbon,” major pension funds are adding “Paris goals” to the criteria by which they evaluate investments, banks are cutting back on lending for traditional energy projects and auto makers are planning to go all-electric in the 2030s.
History shows, however, that energy transitions don’t happen quickly. The key moment in the first major transition—from wood to coal—was in January 1709, when an English metalworker named Abraham Darby figured out how to use coal in order, he said, “that a more effective means of iron production may be achieved.” But it took two centuries before coal overtook wood and waste as the world’s No. 1 fuel. Oil was discovered in western Pennsylvania in 1859, but it was not until a century later, in the 1960s, that oil replaced coal as the world’s top energy resource.